Can affordable housing create economic integration?

Pete Saunders, who has been on a blogging tear lately, just posted a mini review of the literature on gentrification management:

I think today’s urbanists, the young educateds who are leading today’s return to cities, would do well to seek out this research.

Speaking of many of today’s urbanists, I’m not sure many are aware of the gentrification management research that exists.  Many come to their preference for cities through the New Urbanism or Smart Growth movements, which emphasize quality urban design (New Urbanism) or the the policy framework needed for successful and sustainable cities (Smart Growth).  But people who have been working in the field of community development have been addressing this for years.  Perhaps it’s time for their work to see the light of day.

Very true! As an aside: I’ve been meaning for a while now to start a regular feature on the blog where I’d write up quick summaries of interesting research coming out of both scholarly journals and groups like the Urban Land Institute and so on. A lot of them bear directly on issues that the non-academic, non-community development urbanist blogosphere debates all the time, and many aren’t really that much more wonkish or difficult to understand than your average Streetsblog post. Maybe after finals.

Anyway, the basic question in the papers Pete linked to (here, here, and here) is whether anybody knows how to create long-term economic integration in low-income neighborhoods that are becoming high-income neighborhoods – in other words, gentrifying. Gentrifying communities are of particular interest because the market is already creating some amount of short-term integration, and manipulating that process seems a lot easier than either trying to convince a stable wealthy neighborhood to accept lots of new low-income residents, or convincing lots of white-collar professionals to move into a relatively poor neighborhood that isn’t gentrifying.

It seems easier. But reading one of the papers – an Urban Land Institute case study series from 2006 – mostly reinforced my sense that the kinds of things cities and neighborhood associations currently do to promote integration, worthwhile as they may be, are just totally inadequate for the enormity of the task. Recall, please, that in many of America’s major cities, anywhere between a fifth and half of all low-income neighborhoods are gentrifying, representing tens or even hundreds of thousands of people.

Keep those numbers in mind as you read my very quick summaries of the case studies below. (The ULI paper looks at six neighborhoods in six different cities. I’ll cover four here, leaving out the two that ULI characterizes as being at the very early stages of gentrification, where almost no one has been displaced and it’s still unclear whether market forces will actually gain momentum.)

  1. Reynoldstown, Atlanta. Since the early 1990s, a local community development corporation has been using local and federal resources to build below-market-rate housing on vacant lots in a neighborhood that is beginning to see home prices rise notably. Over about ten years, the CDC has built 190 units, but its efforts are already being slowed by rising prices, even though “the majority of [market-rate] housing stock is [still] affordable.”
  2. Figueroa corridor, Los Angeles. A city-run housing trust fund – the best-funded in the country, with about $40 million a year – has created 527 below-market-rate units citywide in ten projects, of which two are in this neighborhood. This is over about five years.
  3. Central Area, Seattle. A local CDC has built 28 units of below-market-rate housing. As of the ULI report (2006), the CDC is shifting focus from building to maintaining units, because land prices are too high. They are using $86 million to preserve 20 units and creating 49 more.
  4. Uptown, Chicago. An affordable housing ordinance has created 22 below-market-rate units in this neighborhood over two years.

Now, to be fair, it is probably the case that in each of these neighborhoods – certainly in the cities as a whole – the particular strategies that ULI highlighted aren’t the only policies adding affordable units. But they were selected for study because they were having the biggest impact, and none of them – even assuming a 50%, 75%, 100% bump from other policies – are setting the stage for meaningful economic integration.

On the face of it, the most ambitious is LA’s housing trust fund, which gets a decent amount of money and has produced by far the largest number of actual units per year: about 100 for the whole city, and (if the projects are of similar size) 20 in the Figueroa corridor. But think about that for a moment: in a city where 12% of all neighborhoods (representing very roughly 400,000+ people) are gentrifying, and where a map of overall housing affordability looks like this (orange = bad):

…that just isn’t going to cut it. Actually, the story of LA’s housing trust fund gets better (sort of) after ULI’s report was published in 2006, but it’s still overwhelmingly depressing: as of 2008, the city was building 1,200 units a year, which soon fell back down to about 250 after the financial crisis. As a point of reference, LA estimates that there is demand for almost 12,000 units per year.

To summarize: in the absolute best, pre-Great Recession year, one of the most ambitious and well-funded affordable housing programs in the country met just about 10% of the actual demand for affordable housing, a number which has since fallen to about 2%.

In other words, one of the best-funded affordable housing programs in the country would need something on the order of a fifty-fold increase in funding in order to keep up with demand.

Again, it’s not that these sorts of things aren’t worth doing – 250 units is 250 units, and 11 per year in Uptown (oy, oy, oy) is still…11, which is not zero. And they may be much more effective for other kinds of goals: investing a lot in new mixed-use, mixed-income buildings, like Chicago is doing in some neighborhoods, may very well help stabilize areas that would otherwise see no investment at all.

Moreover, on a larger scale, affordable housing is clearly extremely effective at maintaining economic integration. In New York, where close to half of all housing units are either public, subsidized, or rent controlled, those programs are all that prevent a huge number of communities from being entirely out of reach to the non-rich. The ULI report even mentions that in Uptown, about 20% of all units are below market rate, a legacy of midcentury urban renewal programs that concentrated low-income people in what was, at the time, a highly undesirable neighborhood. Now that it’s gentrifying, those units are a bulwark against mass displacement – and an effective one, at that.

Uptown

But the capacity for building new units on the scale of New York – or even Uptown – seems totally out of reach. Each of the case studies in the ULI report mentioned the difficulty of funding construction because of rising property values, even relatively early on in the gentrification process. The best-case scenario, it seems, would be identifying gentrification in a neighborhood well before it has caught on, and then unleashing a pull-out-all-the-stops building program to get as much below-market-rate housing in as possible before it’s too late. But even if it were possible to correctly identify those neighborhoods and act quickly and nimbly enough to build that housing, wouldn’t you run the risk of scaring off the very upper-income people whose integrating presence is the entire point of the exercise? If those people never come – either because you were wrong in your predictions, or because people with options tend to be put off by the presence of large amounts of low-income housing – then all you would have accomplished is further concentrating poverty in that neighborhood.

And even then, you run into funding issues.

The sheer enormity of the problem – remember, economically integrating gentrifying neighborhoods is only one small piece of economically integrating our entire cities – is why I’m so bullish on solutions that don’t require massive government programs. We already know that there are policies that can dramatically increase integration, both racial and economic, and create tens or even hundreds of thousands of meaningfully affordable housing units, without requiring any funding at all. (For those of you who have never read this blog before, I’m referring to looser zoning codes that allow for more housing construction where it’s demanded.) They have their own political issues, of course; but overcoming the politics of zoning seems like less of a problem than finding the money to, say, increase the budget for one of our country’s largest programs by 5,000% – money that simply isn’t there, and probably won’t be for the foreseeable future.

Our more traditional subsidized housing programs should continue and be expanded: they play a variety of important roles, especially as a safety net for the very poor. But given their current cost and scale, I can’t imagine how they could be given enough funding to begin to tackle the full problem of economic segregation. We need more.

About these ads

4 thoughts on “Can affordable housing create economic integration?

  1. What do you think of the other proposals in Pete’s article of promoting community networks and building the skills/assets of existing residents? The latter is definitely a good thing, but should be done equally in non-gentrifying neighborhoods in my opinion. The former might be helpful in encouraging neighborhood activism to fight gentrification (which could also include support from newcomers), but I’m not sure if this would be enough to fight rising rents in the long run.

    • I mean, I’m instinctively in favor of all those things. I’m not really familiar with the evidence about how well they work, so I’ll try to avoid forming a strong opinion. Part of the issue, though, is that in desirable neighborhoods where the supply of housing is more or less fixed, it doesn’t really matter what the distribution of income is. Or, rather, it does, in the sense that if the bottom 20 or 50 percent is richer, then having them all be clustered together is probably less of a disaster. But they won’t be any less clustered, because if Fancy Neighborhood X has 500 units of housing, then those units will go to the 500 richest people who want to live there, no matter how much money person #501, let alone #10,000, has. That’s how the market works. To actually expand the income mix – the increase the number of units that are available to people who aren’t in that top 500 – you need to build more housing.

  2. Loosening up the zoning is great, but it seems like their is need for innovation in other areas, that address the true costs of housing from a full life cycle (multi-generational) perspective. I’ve lost track of the article that spurred this line of thought, but it calculated the cost of a housing unit over 100 years, including interest payments, heating and other energy costs, maintenance, real estate transaction fees, maintenance costs, insurance, land costs, real estate taxes, etc. Factoring in all of these costs, the cost of construction might be 5% of the total 5-generation costs. There are strategies that could be applied to all of these. I’m working with a developer on a potential large scale brownfields development where an array of coops would be used to capture some of these costs and divert it back to equity for the residents. The land might be held by a trust, providing some benefits in terms of address complex environmental liabilities, as well as monitoring and maintenance requirements that could be accomplished efficiently on a collective basis rather than piecemeal by individual small parcel owners. The brownfield issues and environmental conditions represent a technical challenge, but one for which reliable mitigation measures are available – making the “tainted” condition an asset in terms of making the land cost manageable. High densities, will further reduce the per unit land cost. The roofs of the buildings will be used for energy production and urban farming, thereby transforming them functionally into something that can be treated separate as a utility with additional low cost funding options and the ability to remove this cost from the basic occupancy ownership cost. The project is a bit of a long shot, and would only present innovations for some of the life-cycle costs that represent the main component of the housing costs. The goal is to create affordable housing by – making housing affordable through legal, engineering, and financial innovation – not subsidy or zoning changes.

    • Yeah, I don’t know nearly enough about the actual process of development and related costs to begin to comment on in, although I’m hoping to start talking to people who can teach me a bit. That said, it is clear the minimum market prices, based on these costs, are way higher than large numbers of people can afford, so yeah, something has to happen. As a policy person, my response is there have to be subsidies – but if there are ways to cut costs on the construction/maintenance/regulatory end, that would obviously also help.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s